Stellar Diamonds plc today announced that it has agreed to a “Proposed Transaction” with Octea Mining Limited   to combine Stellar’s Tongo kimberlite diamond project with Octea’s adjacent kimberlite diamond project, Tonguma in Sierra Leone. 

“The Potential Transaction, if completed, would be classified as a Reverse Takeover under the AIM Rules for Companies and would require the publication of an admission document and also be subject to shareholder approval,” Stellar Diamonds said in a press note. “Accordingly, trading in the Company’s shares on AIM will remain suspended until either an admission document is published or the Company announces its or Octea’s withdrawal from the Potential Transaction.”

The Company had earlier announced, on August 19,  the suspension of the trading of  its ordinary shares on AIM   pending a “Potential Transaction” and had promised further details of the same in due course.

The two Companies together have an   inferred JORC diamond resource of 5 million carats which they plan to bring  “into a single mining operation”.   Diamond grades for the  resource  are  up to 290 carats per hundred tonne (cpht); with an average diamond value of US$193 and US$270 per carat for Tonguma and Tongo respectively. Stellar has announced an exploration target of up to 8 million carats.

“The Proposed Transaction, if completed, will be transformational for Stellar and its shareholders,” commented Stellar’s Chief Executive Karl Smithson. “Once in production the combined diamond mining operations will be the second largest in West Africa with an estimated maximum output at full production of approximately 250,000 carats per year of high value diamonds. The high grade and high value nature of the kimberlites to be mined are compelling and the combination of operations should provide meaningful cost synergies that will enhance Stellar’s projected operational margins. Using the available infrastructure at Tongo and Tonguma, we expect diamond mining operations to commence within the first 12 months post completion of the Proposed Transaction.”

Octea’s General Manager Christo Swanepoel commented: “We are very excited to be combining Octea’s Tonguma project with Stellar’s Tongo project and bring the enlarged project into production under Stellar’s operational management. Stellar has long-standing expertise in Sierra Leone and the Tongo region in particular, which we believe will be of great benefit to the project. In addition, the enlarged project should significantly increase local skilled employment for many years to come which in turn will support the local economy as well as generate significant funds for the Sierra Leonean Government.”